TIME FOR A 카지노 바카라 DIET? DECIDING WHAT CUSTOMER INFORMATION TO KEEP -- AND WHAT TO TOSS
A version of this article was originally published by Knowledge at Wharton
Heartland Payment Systems, a credit card processor, may have had up to 100 million records exposed to malicious hackers. Payment processors CheckFree and RBS Worldpay, and employment site Monster.com have all reported 카지노 바카라 breaches in recent months, as have universities and government agencies. Experts at Wharton say that personal 카지노 바카라 is increasingly a liability for companies, and suggest that part of the solution may be minimizing the customer information these companies keep.
Indeed, according to Wharton marketing professors Eric Bradlow and Peter Fader, companies should deploy a technique called "카지노 바카라 minimization." The concept: Keep the customer 카지노 바카라 a company needs for competitive advantage and purge the rest.
The problem with the 카지노 바카라 hoarding approach is that companies can't use most of the information they keep, says Fader. Meanwhile, they become 카지노 바카라 pack rats, chasing an illusory dream of one-to-one marketing, which he says "is a myth. The best thing to do is aggregate information so companies can predict something like, 'Among all people who bought five times or more, how many times are they likely to buy in the next year?"'
The cost of a 카지노 바카라 breach in 2008 was 2 per compromised record, up 2.5 percent from 7 per record in 2007, according to the Ponemon Institute, a Michigan group that researches and consults on privacy and information security issues. Ponemon's estimates are based on interviews with companies that have suffered breaches to customer records that include credit card numbers and, in some cases, personally identifiable information. Following a 카지노 바카라 breach, companies often must hire security consultants, engage legal counsel and offer credit monitoring services to affected customers. The Institute also found that companies will lose customers in the year following a 카지노 바카라 breach. For example, health care and financial firms lost 6.5 percent and 5.5 percent of customers, respectively, after such incidents.
The real challenge for companies is assessing what customer information they need to retain, says Fader, who adds that firms may be keeping an excessive amount of 카지노 바카라 because they can't pinpoint what they actually want. "카지노 바카라 minimization involves more than just the 카지노 바카라. You can't minimize 카지노 바카라 until you know what to do with it. What 카지노 바카라 elements do you need to predict customer behavior?"
The inability to answer those tough questions, says Bradlow, could be one reason why companies default to storing as much 카지노 바카라 as possible -- not the best strategy when it's clear that many companies don't know what to do with this 카지노 바카라 even when they have it.
Fader and Bradlow recommend a simple approach to 카지노 바카라 minimization. First, companies should figure out what information they need to track consumer behavior. Then, aggregate that information over a defined period such as two to four months. With that aggregated information, a company can create histograms -- graphical representations of aggregated 카지노 바카라 -- and throw away original 카지노 바카라.
Fader suggests that histograms offer accuracy rates close to individual targeting -- without the risk. Purging individual information lowers costs because companies don't have to secure information in transit, store and analyze 카지노 바카라, and navigate a bevy of regulations across the globe. "Maintaining 카지노 바카라 warehousing is costly because the minute you keep 카지노 바카라, you have to protect it," says Bradlow. "Most firms realize they can't do one-to-one targeting so why not only keep 카지노 바카라 that's relevant?"
Fader and Bradlow acknowledge that the argument for 카지노 바카라 minimization is only just beginning. For 카지노 바카라 minimization to become the norm, a company's management, privacy officers, legal counsel and marketing team will have to reach consensus on customer 카지노 바카라 collection. Legal and privacy experts are likely to support 카지노 바카라 minimization, while marketers will argue for keeping all the 카지노 바카라 they can collect.
In addition, 카지노 바카라 minimization practices will vary by industry. Wharton operations and information management professor Eric Clemons says that 카지노 바카라 can be a competitive advantage for many companies. For instance, Capital One used customer 카지노 바카라 to better segment its most profitable customers and poach similar ones from larger rivals. In this example, customer information led to varied pricing models -- such as interest rates that varied by customer credit ratings -- that maximized the profit from the top decile, or 10 percent, of customers. "Under the uniform pricing models of the mid 1990s, the top decile of customers produces 150 times more profit than average," says Clemons. "Capital One found a way to attract the best customers away from other issuers."
In a co-authored study, Clemons found that Capital One used what it calls an 카지노 바카라-based strategy that allows the company to try varying approaches based on differences between itself and rivals. This strategy allowed Capital One to deploy a mass customization model. That model also generated returns, says Clemons. Capital One sustained double-digit returns on equity and double-digit increases in sales and profit growth due to its approach.
Clemons argues that storing customer 카지노 바카라 in bulk could lead to new pricing strategies. He agrees that one-to-one marketing is illusory at best, but a move to precision pricing -- or figuring out exactly what an individual customer will pay -- may warrant being a 카지노 바카라 pack rat.
Meanwhile, there's another conundrum companies face: 카지노 바카라 purged today could be valuable tomorrow. "Ten years ago, one of my clients wanted to purge his 카지노 바카라base. It was an insurance company, but once you purge your 카지노 바카라base, you know no more about your customers than a new entrant," says Clemons. "That was OK under existing pricing models, but after any form of insurance deregulation, the information they were purging would have been enormously valuable."
Ultimately, the choice to follow 카지노 바카라 minimization practices boils down to one question: What will a company do with the 카지노 바카라?
Bradlow says 카지노 바카라 minimization has the potential to be one of the key security tools used by companies, even if it remains largely an academic concept today. "Security professionals will buy (카지노 바카라 minimization). Next, you have to convince the marketing world and begin giving talks outside the ivory tower. I think firms will start buying in."
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